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April 23, 2020 | auto

Is a Mechanical Protection Plan Worth Your Money?


If you’re in the hunt for a new car, you should expect to be offered a mechanical protection plan. This often catches many people off guard; without time to do research, they drop money on something they might not need.

The details of mechanical protection plans (or MPPs) can get a little confusing. Sometimes it's even unclear what exactly you are buying. In this article, we’ll break down what an MPP is, what it typically covers, and whether it is worth your money.

What Is a Mechanical Protection Plan?

Mechanical protection plans are packages that car owners can purchase in exchange for future car repairs and similar services. Over the years, these plans have come to be known by several different names depending on your coverage provider. Some organizations, including Amplify Credit Union, refer to them as "major mechanical protection" plans, while dealerships will often refer to these plans as "extended warranties" or even "service contracts."

The way they work is pretty simple. Folks who purchase these plans typically do so when they buy a car from a dealership. The company you buy the protection plan from will then pay for covered repairs after the manufacturer’s limited warranty expires for the duration of the contract. 

Where Can You Get a Mechanical Protection Plan?

Auto service contracts can be purchased through vehicle manufacturers, auto dealerships, and independent providers. Frequently, dealerships will work with independent providers. For example, MPP vehicle service contracts are offered through select dealerships listed on the MPP website. 

Mechanical Breakdown Insurance

Some auto insurance companies offer mechanical breakdown insurance, which is a little different than a mechanical protection plan. This insurance is an additional type of coverage that you can take out on top of your comprehensive or collision coverage. 

Whereas comprehensive and collision policies cover damage to your car in the event of an accident, mechanical breakdown insurance covers more typical car repairs. And unlike extended warranties, mechanical breakdown insurance is subject to the regulations of the insurance industry. 

What Does a Mechanical Protection Plan Cover?

Mechanical protection plans have different levels of coverage that you can choose. Plans can be purchased for both new and used vehicles, as long as they meet the specified requirements. 

Unlike factory warranties - which typically only cover manufacturer defects - some MPP new car warranties cover part failure due to wear, tear, and use. Higher levels of coverage will also include select routine maintenance costs. 

Few of these plans cover everythingThere is typically a list of exclusions and scenarios that would prevent an included item from being covered. On top of this, you cannot take your car to any repair shop and expect MPP to cover costs. Vehicle service contracts are generally only accepted at dealerships and authorized ASE repair facilities.

The most important thing to know is that a mechanical protection plan is not a substitute for insurance coverage. An MPP only covers breakdown repairs, not repairs needed due to an accident. 

How Much Does a Mechanical Protection Plan Cost?

Mechanical protection plans are paid for upfront, usually when you purchase the car. The cost can be rolled into your vehicle financing, or financed separately with a down payment and a year-plus repayment term. Prices vary depending on several factors, including:

  • The make and model of the vehicle
  • How old the car is
  • The number of miles it has 
  • The deductible amount and the level of coverage that you select

On average, however, you can expect to pay anywhere between $1,000 and $3,000 for a plan.

Should I Get a Mechanical Protection Plan?

The value of an MPP is often tied to the performance of your vehicle. Some people who purchase the plan experience a significant system failure within the first few years of ownership. For them, the service contract was an important investment.

Conversely, many may go the entire life of the service contract without ever having to use it. Newer cars are less susceptible to breakdowns and failures, making it less likely that you'll get your money’s worth. While any car is at risk for a major mechanical failure, some prefer to set that money aside in an emergency fund themselves. 

Need a little outside perspective? A recent Consumer Reports survey found that car owners typically paid much more for extended warranty coverage than they received in direct benefits. Nearly 55% of owners never even used the warranty at all. Around three-quarters of respondents said that they wouldn’t get an extended warranty again. 

Purchasing a Plan

If you do decide to purchase a mechanical protection plan, here are a few things to keep in mind:

  • Research all of your options. Shop around to find the best company and plan for your unique situation.
  • Read everything carefully. Before you hand over your money, be sure that you fully understand what is covered under your specific plan. Some plans can be sneaky with exclusions or stipulations that void the contract. 
  • Know what’s required. You may feel pressured to purchase a protection plan. In some instances, it may even be implied that this plan is necessary to obtain financing. However, this is not the case. An extended warranty is not required to get a loan.

It is also essential to make sure you are using a trusted service. The Federal Trade Commission warns of extended warranty scams, as they are pretty common. Always be sure to purchase through a reputable company and never give out personal information to an unknown caller. 

Conclusion

A mechanical protection plan may not be the right investment for everyone. Always weigh your options carefully, and don’t let anyone pressure you into agreeing to something you don’t fully understand. Mechanical protection plans can give you peace of mind, but many people never end up using it. Consider the hefty upfront price tag against the likelihood of a major repair and your ability to pay for it in the future. 

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